Finance & Banking

The Reserve Bank of India issued final directions on September 21, 2026, establishing minimum capital requirements for market risk under the revised Basel III framework for commercial banks. The regulations aim to align national guidelines with international standards while ensuring regulatory simplicity and flexibility. The new rules will take effect on April 1, 2027, following a transition period where intermediate scalars have been in place since April 1, 2024. The framework introduces a Simplified Standardised Approach (SSA) to calculate market-risk-weighted assets covering interest-rate, equity, and foreign-exchange risks. It clarifies that the trading book includes all instruments classified as 'Held for Trading' (HFT), while prohibiting banks from shifting instruments to the banking book solely to reduce capital requirements. Banks must maintain required capital continuously, including at the close of each business day, and can hedge banking book risks through external hedges or internal risk transfers. Key modifications include revised specific risk tables for interest rate risk aligned with Basel Committee on Banking Supervision guidelines and updated capital treatment for debt mutual funds and exchange-traded funds held in the trading book. The RBI also permits the exclusion of certain structural foreign currency investments from Net Open Position calculations on a case-to-case basis, subject to a six-month minimum retention period and quarterly recalculation